Loosen the Grip of Compression with Analysis

Employers all over the country are feeling the squeeze caused by compression, and pretending it’s going to go away will only make things worse. Pay compression occurs when there are little or no differences in pay, but large differences in responsibilities, skills, or qualifications between positions within an organization. As state and federal minimum wages increase, the grip of compression grows stronger. New workers are hired at nearly the same rate as workers with more skills, experience, or seniority. With no plan in place to account for this problem, Companies are seeing lowered morale that leads to decreased productivity and increased turnover.

Minimum wage increases aren’t the only cause for the present salary compression that employers are feeling. The tight labor market is forcing companies to offer qualified candidates higher compensation than was necessary just a few years ago. Talented candidates have many more employment options today, and companies have to increase the starting salaries just to secure the best employees for their organizations.

Our longstanding top performers know this too! So what are they left to do? The ones that really WANT to stay with their employers are asking to be paid at a level that is commensurate with their skills and experience. When those negotiations aren’t earning our longstanding employees the wages that reflect an appropriate variance between their responsibilities and those of a new-hire – they’re left with two options: either stay and reduce their production or apply elsewhere to get paid a fair wage.  Either way – their employer pays!

Avoid Paying For Compression Twice! 

The only way to decrease the pressure of compression is to implement pay equity measures in your organization immediately.  Jobs need to be classified by their responsibilities, not by the person in the role in order to establish base compensation levels. It’s also important to use salary survey information to ensure that your organization is offering salaries that are in a competitive range within your geographic and industrial segment. 

The process of ensuring pay equity becomes more complicated as you introduce incentive plans, performance based pay increases, and/or the merger of more than one operating entity. Fortunately, EANE has all the tools you need to evaluate and implement pay equity measures, so don’t get intimidated by the process and hope things will get better on their own.     

Reactive salary expenditures never bring the same ROI – in terms of securing an engaged and productive workforce – as proactive salary expenditures. To that end, you can avoid paying for compression twice if you start taking steps now to ensure pay equity in your workforce today.